March 26, 2007

So, last week Gordon Brown delivered what is widely touted as his last budget before becoming Prime Minister. And as I’m sure all interested parties have heard, he left a stonking great big change until the end of his speech. The basic rate of tax has been lowered by 2p in the pound to 20%. Hooray!Well, all the commentators pointed out that we’ll be paying for this with the abolition of the 10% tax band. Still for people in my income bracket (earning between about Â£18,000 and Â£33,000) we’ll be better off than before. For those paying income tax, but earning less than about Â£18,000 you’ll lose out and be slightly worse off than before. Earning between Â£33,000 and Â£39,000 will see you worse off due to changes in NI bands, and earning between Â£39,000 and Â£43,000 will see you better off as the higher rate tax threshold has been raised. Earning above Â£43,000 and paying higher rate tax should see you paying close to the same amount in tax and National Insurance combined.I’m not sure that I see the point of this tax change, even though it makes me better off. Its not a Robin Hood style tax cut (taking from the rich to give to the poor) as the benefits are unevenly distributed. I guess the tax-cutting headlines look good though. It certainly seemed to take the wind out of the sails of the Conservatives, which is probably the main target.